EMPLOYMENT AGREEMENT

     This Employment  Agreement (the "Agreement") entered into as of December 1,
2003, by and between Beacon --------- Power Corporation,  a Delaware corporation
(the "Company"), and F. William Capp (the "Executive") ------- ---------

     WHEREAS,  the  Executive  is an  employee of the  Company,  and the Company
desires to retain his services and he wishes to continue his  employment  by the
Company;

     NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt  and
sufficiency of which are hereby acknowledged, the parties agree as follows:

     SECTION  1.  TERM.  The  Company  shall  employ  the  Executive  for a term
commencing  on December 1, 2003 and  continuing  until  December 31, 2004 unless
terminated  pursuant  to  Section 9. The  period of the  Executive's  employment
hereunder is referred to as the "Employment Period."

     SECTION 2. DUTIES.  The Executive  shall serve the Company as President and
Chief Executive  Officer and shall have duties and  responsibilities  consistent
with such position.  Such duties and responsibilities  shall include, but not be
limited to, overall management of the Company.  The Executive will report to the
Board of Directors of the Company (the  "Board").  The Executive  will generally
perform his services at the  Company's  principal  offices,  which are currently
located in Wilmington, Massachusetts;  provided, however, that the Executive may
be required to travel from time to time in connection with Company business.

     SECTION 3. FULL  TIME;  BEST  EFFORTS.  During  the  Employment  Period the
Executive shall use his best efforts to promote the interests of the Company and
shall devote his full business time and efforts to its business and affairs. The
Executive  shall not engage in any business  activity which could  reasonably be
expected to interfere with the performance of the Executive's  duties,  services
and responsibilities hereunder.

     SECTION 4. COMPENSATION. The Executive shall be entitled to compensation as
follows:

     (a) Base Salary. During the Employment Period, the Executive will receive a
salary at an annual  gross rate of $240,000  (as the same may be  adjusted  from
time to time, the "Base Salary"),  which shall be payable in accordance with the
Company's regular payroll practices applicable to senior executive officers. The
Executive's Base Salary shall be reviewed by the Board at least annually and may
be increased (but not decreased) in the Board's  discretion,  depending upon the
performance of the Executive and of the Company.

     (b) Annual  Bonus.  The  Executive  shall be  eligible to receive an annual
bonus based on the achievement of individual and Company performance  objectives
determined  annually by the Compensation  Committee of the Board in consultation
with the Executive.  The amount of the annual bonus will be targeted at $240,000
per year.  The  Executive and the  Compensation  Committee of the Board will set
performance  goals and targets for the Annual  Bonus prior to January 31,  2004.
The Company will pay Executive  $45,000 in cash as a bonus with respect to 2002,
and the parties  will enter into a  restricted  stock unit  agreement  in a form
approved by the Company and Executive with respect to his bonus  eligibility for
2003 and 2004.

     (c) Withholding.  The Company may withhold from compensation payable to the
Executive all applicable federal, state, and local withholding taxes as required
by law.

     (d) Relocation  Expense  Reimbursement.  Executive shall move his residence
from Minnesota to  Massachusetts,  and if he has so moved by June 22, 2004, then
the Company shall pay him a bonus of $10,000 promptly thereafter. In addition to
the compensation described above, the Company shall also reimburse Executive for
all reasonable  out-of-pocket  relocation and moving costs and expenses incurred
by  Executive  in moving to  Massachusetts,  but shall not  reimburse  any costs
relating  to points or interest  rate  differentials,  or any broker  fees/costs
unless agreed with the Compensation Committee. Where practical,  Executive shall
discuss the principal components of such expenses with a member of the Company's
Compensation  Committee before incurring such expenses. In addition, the Company
shall  reimburse  the  Executive  for  reasonable  coach class  travel  expenses
incurred by Executive  (or by the two members of his nuclear  family  members if
they  travel to meet him) for  traveling  between  Minnesota  and  Massachusetts
during the period  commencing  December 1, 2003 and ending on the earlier of the
date of his move to  Massachusetts  or June 22,  2004.  To the  extent  that any
amounts paid to Executive that are intended to be  reimbursement  for relocation
expenses  provided  for in this  section  are  treated by the  Internal  Revenue
Service or applicable  law as income to him, the Company will pay him additional
compensation  to make him whole for all such  related tax  liabilities  (i.e.  a
gross up).

     (e) Apartment  Rental.  The Company  shall  reimburse the Executive for the
reasonable  cost (not to exceed  $3,500 per month) of an  apartment  within a 25
mile  radius  of  Wilmington,  Massachusetts  to be used by the  Executive  from
December  1, 2003  until the  earlier of March 31,  2004 and the date  Executive
moves to a permanent residence.

     SECTION 5. BENEFITS.

     (a) Generally.  The Executive  will be entitled to such fringe  benefits as
are generally  available to the Company's  executive  officers,  including group
health and dental  insurance  coverage,  group  long and  short-term  disability
insurance coverage,  and 401(k) plan and stock plan participation.  In the event
that any insurance policy is paying disability benefits to Executive, and if the
amount of the Executive's  monthly base salary that would be paid in the absence
of such  disability  is higher than the  monthly  insurance  payments,  then the
Company  shall pay  Executive an amount per month equal to such  excess,  for so
long as the Executive is employed with the Company.  No such difference shall be
payable after the Executive's employment expires or is terminated.

     (b) Paid Vacation.  In addition to U.S. statutory  holidays,  the Executive
will be entitled to 20 business days of paid vacation per year,  accruing at the
rate of 1.66 days per month.  A maximum of ten unused  vacation days in any year
may be carried over and used in the next year,  subject to such  policies as the
Company may adopt from time to time with  respect  thereto.  If by December  31,
each year, the Executive has accrued in excess of ten unused  vacation days, the
Company shall pay (consistent with existing Company policy) the Executive a cash
amount (based on the Executive's  then current year's base salary) equal to such
excess up to a maximum not to exceed ten vacation days.

     (c) Life Insurance.  The Company will provide the Executive with group term
life insurance in an amount equal to no less than two times his Base Salary plus
$1,000,000.

     SECTION  6.  EXPENSE  REIMBURSEMENT.  The  Executive  will be  entitled  to
reimbursement of all reasonable and necessary  business expenses incurred by the
Executive in the ordinary  course of business on behalf of the Company,  subject
to  presentation  of  appropriate  documentation  and  compliance  with policies
established by the Board.

     SECTION  7.   NON-DISCLOSURE   AND   ASSIGNMENT  OF  INVENTION   AGREEMENT;
INDEMNIFICATION  AGREEMENT.  The  Executive  shall  execute  and  deliver to the
Company the Company's standard form of Invention and  Non-Disclosure  Agreement.
The Company and the Executive shall execute and deliver  simultaneously with the
execution of this Agreement an  Indemnification  Agreement in form and substance
satisfactory to both parties (the "Indemnification Agreement").

     SECTION  8.  NON-COMPETITION  AND  NON-SOLICITATION  COVENANTS.

     (a) Non-competition. The Executive agrees that during the Employment Period
and for the longer of 18 months thereafter, and the period for which the Company
is providing  payment to the Executive under Section 9(b)(ii) of this Agreement,
he will not own, manage,  operate,  control, be employed by, provide services as
an independent contractor or consultant to, own any stock or other investment in
or debt of,  or  otherwise  be  connected  in any  manner  with  the  ownership,
management, operation or control of, any business or enterprise that at the time
of  termination,  competes  with the Company or conducts  business in a field in
respect of which the Board is making plans to enter.

     (b)  Non-solicitation.  The  Executive  agrees that  during the  Employment
Period and for two year  thereafter,  he will not  attempt to persuade or induce
any employee of the Company to terminate his or her employment  with the Company
for any reason.

     (c)  Acknowledgments  by  Executive.  The Executive  acknowledges  that the
covenants set forth in this Section 8 are reasonable in scope and are no greater
than is necessary to protect the Company's  legitimate business  interests.  The
Executive further acknowledges that any breach by him of the covenants set forth
in this Section 8 would irreparably  injure the Company,  and that money damages
would not  adequately  compensate  the  Company for the  injuries  that it would
suffer.  The  parties  accordingly  agree  that in the  event of any  breach  or
threatened  breach by the  Executive of any of the  covenants  set forth in this
Section 8, the  Company may obtain,  from any court of  competent  jurisdiction,
both  preliminary  and  permanent  injunctive  relief  in order to  prevent  the
occurrence or  continuation  of such  injuries,  without being required to prove
actual  damages or post any bond or other  security.  Nothing in this  Agreement
shall  prohibit  the Company from  pursuing any other legal or equitable  remedy
that may be available to it in the event of the Executive's breach of any of the
covenants set forth in this Agreement.

     SECTION 9. TERMINATION.

     (a) Employment  Termination.  The  employment of the Executive  pursuant to
this Agreement shall terminate upon the occurrence of any of the following:

     (i) At the election of the  Company,  for Cause,  immediately  upon written
notice by the Company to the Executive. For purposes of this Agreement,  "Cause"
shall be deemed to exist upon a reasonable  good faith finding by the Board that
the Executive has:

          (1) committed an act constituting fraud, embezzlement or other felony,
     determined  in the  reasonable  opinion  of the  Board  acting  in its sole
     discretion, or

          (2) materially  breached his  obligations  under this Agreement or the
     Inventions and Nondisclosure  Agreement,  and failed to cure same within 30
     days after written notice thereof is given to him by the Company, or

          (3) materially breached the Company's material policies, including but
     not limited to the Company's  policies regarding insider trading and sexual
     harassment, or

          (4) engaged in willful  misconduct,  so long as the Board of Directors
     provided   Executive  with  a  reasonable   opportunity  for  Executive  to
     personally present his point of view to the Board.

     (ii) At the election of the Company,  without Cause,  upon at least 90 days
written notice by the Company to the Executive.

     (iii) The death of the Executive, or (in the discretion of the Company) the
Disability of the Executive. For purposes of this Agreement,  "Disability" shall
be considered to exist:

          (1) if the  Executive  fails to perform his normal duties for at least
     60 days (not counting days taken for vacation), whether or not consecutive,
     during any 180-day period, or

          (2) if the  Executive's  insurance  company  has  confirmed  that  any
     disability insurance benefits are going to be paid by reason of Executive's
     incapacitation, or

          (3) if the Board,  acting in its sole discretion but after  reasonable
     consultation  with Executive,  concludes that the Executive  suffers from a
     degree of  physical  or mental  incapacitation  as a result of  illness  or
     accident which makes it reasonably unlikely that the Executive will be able
     to perform  his normal  duties for a period of 60 days.  In  reaching  this
     conclusion, the Board may consult third parties, including, but not limited
     to, other employees, physicians, psychiatrists, and counselors.

     (iv) At the  election of the  Executive,  for any reason,  upon at least 90
days prior written notice to the Company.

     (v) At the election of the  Executive  for Good Reason,  provided  that the
Executive shall have given written notice to the Company within 30 days after he
becomes  aware of the  occurrence  of any event of Good Reason  specifying  such
event,  and such event shall be continued for a period of 30 days following such
notice. For purposes of this Agreement, "Good Reason" means any of the following
events:

          (1) a material diminution in the duties, responsibilities, position or
     job title of the Executive without the Executive's written consent, or

          (2) a material  breach by the  Company of its  obligations  under this
     Agreement or the Indemnification Agreement, or

          (3) a change in the primary  location  where the Executive is expected
     to perform his services  hereunder to a location that is more than 50 miles
     away from Wilmington, Massachusetts, or

          (4) a Sale of the  Business  (as defined  below) For  purposes of this
     Agreement,  a "Sale of the Business" means (A) the acquisition by a person,
     group,  or party  of 50% or more of the  outstanding  capital  stock of the
     Company,  (B) a change of a majority  of the  members of the Board when the
     change of the  various  directors  occurs at  substantially  the same time,
     without the  approval  or consent of the  members of the Board  before such
     change,  (C) the  acquisition of the Company by means of a  reorganization,
     merger, consolidation,  recapitalization,  or asset sale, unless the owners
     of the capital stock of the Company before such transaction continue to own
     more than 50% of the capital stock of the acquiring or succeeding entity in
     substantially the same proportions, or (D) the approval of a liquidation or
     dissolution of the Company.

          (5) the failure of the  Executive  to be elected or  appointed  to the
     Board, or his removal from the Board without cause.

     (b) Effect of Termination.

     (i)  Termination  Pursuant to Section  9(a)(i)  relating to termination for
cause or Section  9(a)(iv)  relating to termination at the election of Executive
for any reason. In the event the Executive's  employment is terminated  pursuant
to Section  9(a)(i) or Section  9(a)iv),  the Company shall pay to the Executive
his accrued Base Salary through the last date of his  employment  hereunder (the
"Termination  Date") and shall continue to provide to the Executive the benefits
described in Section 5 (the "Benefits")  through the Termination Date, but shall
have no further responsibility for any compensation or benefits to the Executive
for any time period subsequent to the Termination Date.

     (ii)  Termination  pursuant to Section  9(a)(ii)  relating  to  termination
without cause. In the event the Executive's employment is terminated pursuant to
Section 9(a)(ii), the Company shall:

          (1) Pay to the  Executive a cash amount equal to his then monthly Base
     Salary  multiplied  by the  number of months  remaining  in the  Employment
     Period, but in no event less than 12.

          (2)  Continue to provide the benefits  described in Sections  5(a) and
     5(c) to the Executive until the first anniversary of the Termination Date.

          (3) Within five  business  days after the  Termination  Date,  pay the
     Executive  an  amount  equal  to his  bonus  for the  prior  calendar  year
     multiplied  by a  fraction,  the  numerator  of which is the number of full
     calendar  months that have elapsed in the then current  calendar year prior
     to the  Termination  Date, and the denominator of which is 12. In no event,
     shall payment under this Section  9(b)(ii)(3) exceed 80% of the Executive's
     base salary for the prior year.

     (iii)  Termination  pursuant to Section 9(a)(v)  relating to termination at
the  election  of  Executive  for Good  Reason.  In the  event  the  Executive's
employment is terminated pursuant to Section 9(a)(v), the Company shall:

          (1) Within five  business days after the  Termination  Date pay to the
     Executive a cash amount equal to his then monthly Base Salary multiplied by
     the number of months  remaining in the Employment  Period,  but in no event
     less than 12.

          (2)  Continue to provide the benefits  described in Sections  5(a) and
     5(c) to the Executive until the first anniversary of the Termination Date.

          (3) Within five  business  days after the  Termination  Date,  pay the
     Executive  an  amount  equal  to his  bonus  for the  prior  calendar  year
     (including the Signing Bonus for terminations prior to the end of the first
     year)  multiplied  by a fraction,  the  numerator of which is the number of
     full  calendar  months that have elapsed in the then current  calendar year
     prior to the  Termination  Date, and the  denominator of which is 12. In no
     event,  shall  payment  under this  Section  9(b)(ii)(3)  exceed 80% of the
     Executive's base salary for the prior year.

     (iv)  Termination  pursuant to Section  9(a)(iii)  relating to the death or
disability  of the  Executive.  In  the  event  the  Executive's  employment  is
terminated pursuant to Section 9(a)(iii), the Company shall:

          (1) Continue to pay to Executive or his estate, as the case may be, an
     amount  equal to his then current  Base Salary for the  three-month  period
     following the Termination Date.

          (2) Continue for the 12-month period  following the  Termination  Date
     all health and dental  insurance  benefits the Executive was entitled to at
     the Termination Date.

     (v) Golden Parachute  Payment Excise Tax Protection.  In the event that the
excise tax imposed by Section  4999 of the  Internal  Revenue  Code of 1986,  as
amended  (the  "Code"),  (or any  successor  penalty or excise tax  subsequently
imposed by law) applies to any payments or benefits paid or conferred under this
Agreement,  an  additional  amount shall be paid by the Company to the Executive
such that the  aggregate  after-tax  amount  that he shall  receive  under  this
Agreement, including this Section 9(iv), shall have a present value equal to the
aggregate  after-tax  amount that he would have  received  and retained had such
excise tax not applied to him. For this purpose,  the Executive shall be assumed
to be subject to tax in each year related to the computation at the then maximum
applicable  combined  Federal  and  Massachusetts   income  tax  rate,  and  the
determination of the present value payments to him shall be made consistent with
the principles of Section 280G of the Code.

     (vi)   Survival.   The  provisions  of  Sections  6-19  shall  survive  the
termination of the Executive's employment in accordance with their terms.

     (c)  Continuation/Nonrenewal.  Unless  this  Agreement  has been  otherwise
terminated  before  December 31, 2004,  the Company and the  Executive  agree to
discuss in good faith the possible  continuation of the Executive's  employment,
commencing  six months prior to December 31, 2004. If the Company fails to offer
the Executive a new  employment  agreement,  with at least  equivalent  material
terms to this Agreement,  by December 31, 2004 and in fact the Executive  ceases
to be an employee of the Company following  December 31, 2004, the Company shall
pay the Executive a monthly amount until December 31, 2005,  equal to the sum of
one-twelfth  of the  Executive's  Base Salary in effect at the expiration of the
Agreement plus  one-twelfth of the Executive's  bonus for the most recent fiscal
year of the Company, in accordance with the Company's regular payroll practices,
less applicable withholdings required by law. In the event the Executive and the
Company do not sign a new  employment  agreement  by  December  31, 2004 but the
Executive's  employment with the Company continues on an at-will basis past that
date but  terminates  for any reason  before  December 31, 2005,  payment of the
foregoing  monthly amount will commence after such termination and continue only
until December 31, 2005. If the at-will employment  continues after December 31,
2005 but then terminates, no such monthly amount will be paid.

     SECTION  10.  NO  CONFLICTING  AGREEMENTS.  The  Executive  represents  and
warrants  to  the  Company   that  he  is  not  a  party  to  or  bound  by  any
confidentiality,   non-competition,   non-solicitation  or  other  agreement  or
restriction  that could  conflict with or be violated by the  performance of his
duties for the Company.

     SECTION 11. NO DISPARAGEMENT. Each party agrees that at all times following
the termination of the Executive's  employment  hereunder,  such party shall not
make or cause to be made,  directly or  indirectly,  any statements to any third
party  that  disparage  or  denigrate  the  other  party  or, in the case of the
Company, any of its current or former directors,  officers or employees,  unless
required by law.

     SECTION 12.  ENFORCEABILITY,  ETC. This  Agreement  shall be interpreted in
such a manner as to be  effective  and valid under  applicable  law,  but if any
provision  hereof  shall be  prohibited  or  invalid  under any such  law,  such
provision shall be ineffective to the extent of such  prohibition or invalidity,
without  invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement.  If any one or more of the provisions contained in
this  Agreement  shall  for any  reason  be held to be  excessively  broad as to
duration,  geographical scope,  activity,  or subject,  such provisions shall be
construed  by limiting and  reducing it so as to be  enforceable  to the maximum
extent permitted by applicable law.

     SECTION 13. NOTICES.  Any notice or other  communication  given pursuant to
this Agreement  shall be in writing and shall be personally  delivered,  sent by
nationally  recognized  overnight  courier or express  mail,  or mailed by first
class certified or registered mail, postage prepaid, return receipt requested as
follows:

      (a) If to the Executive:          (b) If to the Company:
          F. William Capp                   Beacon Power Corporation
          [address withheld]                234 Ballardvale Street
                                            Wilmington, MA 01887
                                            Attn:  Compensation Committee


     or to such other address as a party shall have  designated by notice to the
other party.

     SECTION  14.  GOVERNING  LAW.  This  Agreement  shall  be  governed  by and
construed  in  accordance  with  the  internal  laws  of  the   Commonwealth  of
Massachusetts  without giving effect to any choice or conflict of laws provision
or rule that would cause the application of the domestic substantive laws of any
other jurisdiction.

     SECTION  15.  AMENDMENTS  AND  WAIVERS.  No  amendment  or  waiver  of this
Agreement or any  provision  hereof shall be binding upon the party against whom
enforcement  of such  amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a breach
of any  provision of this  Agreement by the other party shall not operate and be
construed  as a waiver or a  continuing  waiver by that party of the same or any
subsequent breach of any provision of this Agreement by the other party.

     SECTION 16. BINDING EFFECT. This Agreement shall be binding on and inure to
the benefit of the parties  hereto and their  respective  heirs,  executors  and
administrators,  successors  and assigns,  except that it may not be assigned by
the  Company  without the  Executive's  consent,  provided  that the Company may
assign  this  Agreement  to an entity  that  acquires  substantially  all of the
Company's  assets  by means of an asset  sale,  merger  or  otherwise,  provided
further  that such entity  shall agree in writing to assume and be bound by this
Agreement.  This Agreement is personal to the Executive and is not assignable by
him.

     SECTION 17. ENTIRE  AGREEMENT.  This  Agreement  constitutes  the final and
entire  agreement of the parties with respect to the matters  covered hereby and
replaces and supersedes all other agreements and understandings  relating hereto
(including the Employment Agreement dated December 1, 2001 between the parties).

     SECTION 18. PRONOUNS.  Whenever the context may require,  any pronouns used
in this Agreement shall include the corresponding masculine,  feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.

     SECTION 19.  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts,  and with  counterpart  signature  pages,  each of which  shall be
deemed an original,  but all of which together shall constitute one and the same
instrument.

     IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.

EXECUTIVE                                    BEACON POWER CORPORATION

/s/F. William Capp                           /s/Jack P. Smith
--------------------------                   --------------------------
F. William Capp                              Jack P. Smith, Director
                                             Compensation Committee